Lets compare vendors A and B first. The lowest Price can be achieved by ordering
ID: 373342 • Letter: L
Question
Lets compare vendors A and B first.
The lowest Price can be achieved by ordering 400 units from either. Lets calculate other costs.
No. of orders : 700 / 400 = 1.75
Order cost = 1.75 * 11 = $19.25
Holding cost will be same in both cases since Order quantity is same.
Hence, Vendor B will be suitable since Price is lower and rest of the costs are same when Order quantity = 400 from Vendor A or B
Now weighing in Vendor C and D.
Lowest price can be availed by ordering 300 units in each vendor but they are both still costlier than Vendor B ($30.50).
Also, Order cost increases due to high amount of orders.
Hence the clear choice is :
Chris Sandvig Irrigation should order 400 units at a time from Vendor B.
Explanation / Answer
Chris Sandvig Irrigation, Inc., has summarized the price list from four potential suppliers of an underground control valve. See the table below. Annual usage is 700 valves, order cost is $11 per order, and annual inventory holding costs are $2.15 per unit. Vendor A Vendor B Vendor Vendor D Quantity 1-14 15-24 25-99 100-199 200-399 400+ Price $35.00 34.75 33.55 32.35 31.15 30.75 Quantity 1-24 25-99 100-199 200-399 400+ Price $34.75 34.00 32.80 31.60 30.50 Quantity 1-49 50-149 150-299 300+ Price $34.50 33.75 32.50 31.10 Quantity 1-149 150-299 300+ Price $34.25 33.00 31.00 Which vendor should be selected and what order quantity is best if Sandvig Irrigation wants to minimize total cost? Chris Sandvig Irrigation should order units at a time from ) (enter your response as a whole number)
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